unit12ppt

BTEC National Travel & Tourism 2007 specifications (c)Travel and Tourism Publishing Ltd.1

BTEC National Travel and Tourism

Unit 12 Tour Operations

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Unit 12 Learning OutcomesUnit 12 Learning Outcomes

1. Understand the tour operations environment2. Know the range of products and services

offered by tour operators for different target markets

3. Know how tour operators plan, sell, administer and operate a package holiday programme

4. Be able to plan and cost a package holiday



IcebreakerIcebreaker

• Name five different tour operating companies that you are familiar with

• Try and come up with a definition of a ‘tour operator’• Make a list of what you think a new tour operator would have to do

to organise, plan and sell its holidays• Make notes on the range of internal and external influences on a

tour operating company that could affect its profits• Think about the laws and regulations that tour operators must

comply with in the course of their work• Name three specific jobs that are offered by the major holiday

companies • Make a list of the costs that a tour operating company will incur in

the course of its work



Links with other sectors of travel and tourism

Links with other sectors of travel and tourism



CD-ROM activity CD12.1CD-ROM activity CD12.1

Investigates links between tour operators and other sectors of the travel and tourism industry



Vertical integration in the travel industry is when a company has control over other companies that are at different levels in the chain of distribution or in different sectors, for example:

• TUI Travel UK owns Thomson and First Choice tour operating businesses, and the Thomson and First Choice travel agency chains (TUI UK is itself controlled by the German company TUI AG)

• Thomas Cook AG (a German group) owns the Thomas Cook and MyTravel tour operating companies (including Airtours), plus the Thomas Cook and Going Places chains of travel agencies

Vertical integrationVertical integration



Vertical integration at TUI UKVertical integration at TUI UK



• Horizontal integration is when a company owns or has control over a number of companies at the same level in the distribution chain or the same industry sector

• For example, many tour operating businesses that are now part of the ‘big two’ were originally independent companies, e.g. Neilson and Club 18-30 (now part of the Thomas Cook Group), and Something Special and the Holiday Cottages Group (now merged with Thomson)

Horizontal integrationHorizontal integration



Textbook activity 12.1Textbook activity 12.1

To give yourself an example of integration in travel and tourism, carry out some research into either Thomas Cook or TUI UK and design a chart that shows all the different companies it owns across tour operations, travel agencies and transport operations.

This activity is designed to provide evidence for P1



Trade bodies and associations are established to represent the interests of companies in a particular industry sector. The following are important trade bodies in tour operations:

• ABTA – The Travel Association• AITO (the Association of Independent Tour Operators) • UKinbound • The European Tour Operators’ Association (ETOA) • The International Federation of Tour Operators (IFTO) • Federation of Tour Operators (FTO)

Trade bodies in tour operationsTrade bodies in tour operations



Textbook case study – Federation of Tour Operators

Textbook case study – Federation of Tour Operators

Investigates the work of a major trade body in tour operations



Regulatory bodies exist to make sure that tour operating companies operate in a fair, honest, efficient, safe and secure manner, for the good of the companies, their customers, suppliers and society at large . The following are important regulatory bodies in tour operations:

• Civil Aviation Authority (CAA)• Health and Safety Executive (HSE) • Trading Standards Officers • Foreign and Commonwealth Office (FCO)

Regulatory bodiesRegulatory bodies




Investigates links between tour operations and trade/regulatory bodies



• Package Travel Regulations

• Trade Descriptions Act

• Supply of Goods and Services Act

• Consumer Protection Act

• Disability Discrimination Act

• Unfair Contract Terms Act

Legal framework in tour operations

Legal framework in tour operations



• From a lawyer's standpoint, a contract is any agreement that the law will enforce, whether in writing, verbal or implied, i.e. assumed from the conduct of the parties

• Contracts range from the very simple, e.g. buying a drink at a resort complex, to the very complex, e.g. building a cruise ship

• It is important to remember that when a holidaymaker books a package holiday through a travel agent, the contract is between the customer and the tour operator, with the travel agent merely acting as an intermediary. It is against the tour operator that the customer must seek legal redress in the event of a breach of contract

Contract lawContract law



A tour operator’s bond is a formal undertaking from an approved bank or insurance company to pay a sum of money to ABTA or the Civil Aviation Authority (CAA) in the event of the company's financial failure. Bond monies are used in a number of ways:

• Clients whose holidays are actually taking place when a tour operator ceases trading can continue with their holiday as planned or be brought back to the UK

• Clients who have yet to travel on holidays already paid for can get their money back when an operator fails

• Alternative holiday arrangements can be made for clients, who have paid for trips that have yet to take place, when a tour operator ceases trading

BondingBonding



• An ATOL (Air Travel Organisers’ Licence) is a licence issued by the Civil Aviation Authority (CAA) and is required by all individuals and companies selling holidays and seats on charter flights

• Applicants must show that they are fit to hold an ATOL, have adequate financial arrangements and must lodge a bond with the CAA

• In the event of company failure, the bond money is used to repatriate clients who might otherwise be stranded overseas and to refund, as far as possible, passengers who have paid in advance but have yet to travel

Licensing - ATOLsLicensing - ATOLs




Investigates the legal framework of tour operations



External influences on tour operators

External influences on tour operators



• Natural disasters, such as hurricanes, floods and avalanches, can have serious consequences on an area’s travel and tourism industry

• The tsunami of 26 December 2004 was one of the world’s most devastating natural disasters of recent times, killing nearly 300,000 people across a range of countries, including Indonesia, the Maldives and Sri Lanka

• Reports from the World Tourism Organisation (WTO) suggest a drop in tourism of as much as 70 per cent in the Maldives, when January 2003 figures are compared with those of the same month in 2004

• The people in these countries rely heavily on the foreign currency that tourism generates and have worked hard to restore the tourism industry to its former state

Environmental factorsEnvironmental factors




Log on to the Travel Foundation’s website (www.thetravelfoundation.org.uk) and produce an information sheet on the Foundation’s aims, work, structure, partners, etc.


http://www.thetravelfoundation.org.uk/



• Political acts such as war and terrorism can have devastating impacts on a destination and its travel and tourism industry

• This is particularly true when the destination is heavily reliant on tourism and has few other economic activities

• The effects of the 9/11 disaster on world travel still persist today, while recent bombings in Bali, Nairobi, Madrid and Cairo, have immediate impacts on tourism, although most destinations eventually recover lost trade

Political factorsPolitical factors



• A sudden change in world currency exchange rates can wipe out a tour operator’s profit margins overnight

• Similarly, rises in the cost of oil and other natural resources can push up a tour operator’s costs and affect its profitability

• Holiday companies use a number of mechanisms to try and reduce the impacts of these situations

• They can pay for foreign currency and commodities in advance when rates are favourable and sometimes pass the extra costs on to travellers in the form of extra taxes and duties, e.g. in the form of an aircraft fuel surcharge or holiday supplement

Economic factorsEconomic factors



• Tour operating companies have to keep abreast of social changes and adapt their products to reflect a changing society

• The fact that people are generally living longer, are choosing to have children later in life (or not have children at all), changes in the composition of families, working methods and the home/life balance, all impact on the products and services that tour operators offer their customers

Social factorsSocial factors



• The travel and tourism industry has always been at the forefront of new technological developments

• The dramatic growth in the use of the internet for researching and booking holidays is having a major impact on the way that tour operators sell their holidays

• Trends such as the rise in ‘dynamic packaging’ and the computerised reservation systems (CRS) used by travel agents are changing the way that tour operators work

Technological factorsTechnological factors



1. Dynamic packaging

2. Distribution channels and integration

3. Budget airlines

4. Maintaining market share

5. Trend towards independent travel

Challenges to tour operatorsChallenges to tour operators



Dynamic packagingDynamic packaging

• ‘Dynamic packaging’ is when travellers use the internet to research their holidays and make their own travel arrangements direct with airlines, hotels, car hire companies, etc.

• It offers people greater flexibility than buying standard holidays from a travel agency and can sometimes work out cheaper as well



• Traditionally, a person would visit their local travel agency to get advice and book their holiday. This, of course, still happens up and down the country, but travellers are increasingly using the internet to research their holidays and make their own bookings

• Travel companies become integrated to improve their competitive position in the marketplace and increase their market share by having more control and benefiting from ‘economies of scale’, e.g. when a travel agency and tour operator are owned by the same organisation, company functions such as purchasing, finance and human resource management can be carried out by fewer staff, thereby reducing costs

Distribution channels and integration

Distribution channels and integration



• Budget airlines are having important impacts on the work of tour operators, some positive and some negative

• On the positive side, tour operators are able to use the network of routes offered by the budget airlines when developing their holidays, thereby offering a greater variety of destinations at reduced prices

• The negative impact is to do with the fact that travellers are using the low-cost airlines to put together their own holidays – dynamic packaging – by-passing the need for a tour operator’s services

Budget airlinesBudget airlines



Tour operators try to maintain or even increase their market share in a number of ways:

• Through mergers and takeovers – buying a competitor company that offers similar holidays will immediately increase market share and reduce competition

• By reducing prices – this can increase business and is often used when new companies start up

• Increasing promotion – can raise awareness of a tour operator and lead to increased sales

• Improving quality – this can improve customer satisfaction and increase repeat business and recommendations to friends/family

• Training staff – allows tour operators to improve customer service

Maintaining market shareMaintaining market share



Trend towards independent travel

Trend towards independent travel




Write a 500-word newspaper article that explains the challenges facing the tour operating sector and evaluates the effectiveness of two named tour operators that are responding to the challenges.

This activity is designed to provide evidence for M1 and D1




Investigates external influences and challenges to tour operators



1. Outbound – companies that offer holidays for British people travelling abroad

2. Inbound – tour operators that service the needs of overseas visitors to the UK

3. Domestic – companies that develop and sell holidays in Britain

4. Independent – tour operators that are not part of a large, integrated travel company

5. Specialist – holiday companies that specialise in a particular type of holiday or destination, for example golfing trips or expeditions to the Himalayas

Categories of tour operatorCategories of tour operator




Find out some detailed information on one tour operating company in each of the following categories:

• Outbound• Inbound• Domestic• Independent• Specialist

Produce a fact sheet on each company that describes the products and services it provides for its target market(s).




• Outbound tour operators develop and sell holidays for British people wanting to travel abroad

• Some are very big companies that sell millions of holidays every year, the so-called ‘mass-market’ tour operators, while others are small and medium-sized enterprises (SMEs) employing just a few people

• TUI UK/Thomson and Thomas Cook are the UK’s biggest outbound tour operators – together they arrange around 11 million package holidays every year

Outbound tour operatorsOutbound tour operators



Textbook case study – Thomson Holidays

Textbook case study – Thomson Holidays

Investigates a major mass-market outbound tour operator



• Inbound, or incoming, UK tourism is concerned with meeting the needs of the increasing numbers of overseas visitors who choose to visit Britain

• Just as we might visit a travel agency to book our annual overseas holiday or business trip abroad, many overseas visitors do the same in their own country when they want to come to Britain

• A travel agent in the USA, for example, who has a client wanting to spend a week in Scotland, has to contact a tour operator to make all the arrangements

• Many incoming tour operators in the UK are members of UKinbound

Inbound tour operatorsInbound tour operators



• Domestic tour operators are companies that specialise in holidays in the UK for British people

• They offer a very wide range of holiday products, from packages in holiday centres such as Center Parcs and Butlins, to coach holidays in all parts of Britain

• Many domestic tour operators deal directly with their customers rather than selling through travel agents

Domestic tour operatorsDomestic tour operators



• Independent tour operators are usually small businesses that are not part of larger, integrated companies, such as TUI Travel and Thomas Cook

• Because of their size and the experience of their staff, independent tour operators are often able to provide a more personalised service to their customers

• Successful independent tour operators are sometimes taken over by larger travel firms, which are looking to expand their operations and reduce competition in the marketplace

Independent tour operatorsIndependent tour operators



• There is a growing demand for specialist tour operators from a travelling public that is looking for something more than the mass-market companies offer

• There are literally hundreds of specialist tour operators in the UK travel and tourism industry

• Many specialist operators join the Association of Independent Tour Operators (AITO) to help their businesses grow and to develop the interests of the sector

Specialist tour operatorsSpecialist tour operators




Visit the AITO website (www.aito.co.uk) and choose one tour operator that offers holidays to Europe. Compile a fact sheet that describes the products and services offered by the tour operator, analysing how these meet the needs of its target market(s). Recommend, with justification, how the tour operator could expand its range of products and services for its current target market(s) or adapt its range of products and services to appeal to a new market.

This activity is designed to provide evidence for P2, M2 and D2

http://www.aito.co.uk/




Investigates different categories of tour operators



Tour operators’ productsTour operators’ products




Investigates the products offered by different tour operators



Package holidaysPackage holidays



• Tailor-made travel arrangements involve designing all aspects of a customer’s holiday on an individual basis rather than selling a ready-assembled package holiday

• The customer benefits by getting a holiday that is individually tailored to their needs, but it does mean more work for the tour operator

• This type of arrangement is growing in popularity as more people seek out holidays and destinations that offer something different

Tailor-made holidaysTailor-made holidays



• Developments in aircraft technology and reductions in prices have opened up new, long-haul destinations, including Florida, the Caribbean, Brazil, Mexico, Dubai, the Far East, Australia and New Zealand

• The introduction of ‘all-inclusive’ hotels and resorts, have given visitors greater holiday choices

• High-speed rail services, that cut travel times between major cities, continue to be developed across the world

• The growth of low-cost airlines, firstly in the USA and Europe but now spreading to India and Asia, is having a considerable impact on travel patterns and the development of new holiday destinations

Destination, accommodation and transport options

Destination, accommodation and transport options



• The very competitive nature of the tour operations sector means that profit margins on holidays are often very low (and sometimes non-existent!)

• This means that tour operators look for ways of supplementing their income through sales of ancillary products and services, either in-resort or before their clients travel

• The income they make on the sale of add-ons, such as car hire, excursions and travel insurance, can be greater than the profit margin on a holiday, so they are very important to the company

Ancillary products and services Ancillary products and services




Look through a variety of tour operators’ brochures (outbound and domestic) and draw up a list of the different types of ancillary products and services they offer. Make a note of the similarities and differences you find between operators.




A ‘target market’ refers to the customers that a tour operator is trying to attract to buy its holidays. Typical target markets for which tour operators develop holidays include:

• Singles• Families• Couples without children• Groups• Special interest market• Business travellers• Youth market• Activity market• Senior market

A tour operator may concentrate on a single target market or develop holidays that appeal to a variety of customers

Target markets Target markets




Investigates target markets in tour operations



There are four key elements to planning a package holiday programme:

1. Research and product development2. Contracting3. Costing and pricing4. Brochure production

Planning a package holiday programme

Planning a package holiday programme



A great deal of background research is carried out to make sure that tour operators' products have the best chance of meeting their sales potential. Sources of market research data available to help tour operators with this process include:

• Internal sales data• External sales data • Analysis of competitors' programmes • Market research reports • Government data • Analysis of customer satisfaction questionnaires • Financial analysis

Research and product development

Research and product development




Draw a flow chart of the main tasks involved in developing a package holiday programme to a new long-haul destination in South America. Include timescales and staff/departmental responsibilities in your chart.




There are three main types of contracts used in tour operating:

1. Commitment/guarantee – where the tour operator guarantees to pay for a certain number of bed spaces

2. Allocation and release back – where the tour operator agrees an allocation of a certain number of bed spaces with the hotel and agrees to give back any that it has not sold by a certain date

3. Ad hoc – this is the most flexible arrangement, when a tour operator agrees a contract (discounted) rate with a hotelier and makes bookings as and when required

Negotiations on contract terms usually start a year before the holidays are sold

Contracting Contracting



• Cost‑based pricing involves calculating all the fixed and variable costs of a tour product, including any commission payments to agents, and setting the price at a level which covers all these costs and allows a profit margin

• Sometimes referred to as 'what the market will bear', market‑based pricing sets pricing in a wider context by taking account of what competitors are charging when determining prices

Costing and pricing Costing and pricing



Brochure production Brochure production




Carry out an analysis of six summer sun brochures from different tour operators and rate them on:

(1) Overall quality and content(2) Use of images(3) Style of copy(4) Ease of use

Make suggestions as to how the shortcomings you identified could be put right





Investigates the quality and content of brochures



Tour operators can sell their holidays through a variety of distribution channels, including:

• High street travel agents• Online travel companies, e.g. Expedia, lastminute.com,

etc.• Direct to customers via the internet, telephone, television

and brochures• In conjunction with newspapers and magazines

Selling direct to customers tends to offer a higher profit margin for the tour operator, since there are no agents or ‘middle men’ to pay

Selling package holidays Selling package holidays



• Tour operators must promote their products well if they are to reach their sales targets

• In large tour operating companies, marketing department staff plan and co‑ordinate a range of promotional activities including advertising in newspapers, magazines, on the internet and Teletext, direct mail, product launches, sponsorship and sales promotion, to ensure that the operators' products are given maximum exposure

Sales promotions Sales promotions




Investigates sales promotions in tour operations



Reservations Reservations

• Most tour operators, whether large or small, use computerised reservation systems to process bookings, offer alternatives if a first choice of holiday is not available and generate the paperwork associated with a sale

• With the growth in the use of the internet for online bookings, which are often confirmed electronically, many reservations staff are now found in call centres, handling high volumes of ‘phone calls from agents and the public



• The tour operator’s administration department is responsible for producing invoices, receiving payments and issuing tickets and other documentation

• Staff also produce passenger lists, known as manifests, for distribution to airlines, hoteliers, ground handling agents and resort representatives, plus carry out the full range of everyday administrative duties associated with the operation of a commercial concern

Administration Administration




Working as part of a small group, list the main tasks that would be undertaken by staff in the administration department of a major outbound tour operator. Use your list as the basis for drawing up a job description and person specification for the permanent post of Administrative Assistant for a mass-market operator based in Manchester.




As well as being responsible for researching, planning, costing, promoting and selling package tour programmes, UK-based tour operations staff have a number of important duties to perform to ensure that holidays run as smoothly as possible, including:

• Managing changes – to travel arrangements and bookings, e.g. overbooking, cancellations, errors, name changes, flight/coach transfers, consolidations (when a flight is cancelled and its passengers are transferred to another), etc.

• Duty office – this is the main link between resorts and UK operations, manned 24 hours a day in case of problems. In extreme cases of emergency, duty office staff can charter aircraft to repatriate customers as the need arises

• Customer service – handles all aspects of the customer/tour operator interface before departure, in-resort and post-holiday

Operations Operations



As well as having a general duty to provide a high standard of service to the tour operator's customers while abroad, staff in the overseas office of a major UK tour operator will have a number of specific responsibilities, including:

• Checking passenger manifests (lists of customers travelling)• Organising transfers to and from the accommodation and airport• Selling and arranging excursions and other 'extras' such as car hire• Finalising contracts with hoteliers and transport operators• The well‑being, training and deployment of representatives• The handling of complaints and emergencies• Crisis management in the event of a major incident• Ensuring health and safety procedures are followed by staff and customers• Feeding back to the UK office any formal or informal research findings

Overseas operations Overseas operations




Design an illustrated chart that shows the different roles carried out in the UK and overseas by a major, mass-market tour operator.




A great deal of time and effort goes into planning a package holiday programme. Tour operators have to make decisions on:

• Destinations – how many and which to include in a tour programme

• Transport – what types to offer, plus which departure and arrival points to use

• Accommodation – location, type, quality and quantity needed

• Excursions – whether included or optional, what type to meet customer needs

• Additional services – for example, travel and accommodation upgrades, insurance, car hire, airport parking, etc.

Planning a package holiday Planning a package holiday



Tour operators have to consider a number of important factors when determining the final selling price of a holiday, including:

• The contracted rates that have been agreed with accommodation providers, airlines, car hire companies, transfer service providers, etc.

• Seasonal adjustments• Load factor on the aircraft, i.e. the percentage of seats that need to

be filled before the tour operator breaks even and begins to make a profit

• Fixed costs• Variable costs• Indirect costs, e.g. head office overheads• Direct operating costs, e.g. the cost of accommodation• Profit margins

Costing a package holiday Costing a package holiday



Fixed and variable costs in tour operations

Fixed and variable costs in tour operations

Fixed Costs

• Rates• Rent or mortgage• Interest on loans• Bonding monies• Maintenance• Cleaning• Insurance• Staff salaries• Lighting and heating• Market research

Variable Costs

• Postage• Telephone, fax and internet• Computer and equipment hire• Printing and stationery• Advertising and publicity• Part‑time staff• Professional fees and charges• Bank charges• Transaction charges, e.g.

credit cards




Investigates fixed and variable costs in tour operations



Costing a package holiday to Corfu

Costing a package holiday to Corfu




Investigates profitability in tour operations




Your uncle has always wanted to set up a business offering walking holidays in the Pyrenees, after many years of enjoying similar holidays with HF Holidays, Headwater and Ramblers’ Holidays. He has asked you to help him research the idea and put together a programme for six week-long tours in May and September. If these go well, he hopes to expand the number of weeks in future years. He will lead the tours himself and take no more than 12 walkers on each tour.

You will need to carry out some in-depth research to address the following points:

1. Which destination(s) to use in the Pyrenees2. What transport arrangements to get to the Pyrenees would suit best3. What type of accommodation is needed and on what accommodation basis4. What excursions and activities should be included in the package5. What precise dates and timescales should be agreed

……continued………



You can assume that all suppliers will give you discounted, inclusive tour (IT) rates for accommodation, travel, excursions, etc., but as this is a new venture you are only likely to be offered a discount of 25 per cent off their brochure rates, e.g. you will be charged £37.50 for a room that would appear in a hotel’s tariff as £50.

Having designed and planned your package, you are now in a position to cost it. As with the example of the package holiday to Corfu on page 69 of the textbook, you will need to calculate all the direct costs of the holiday and add a mark-up of 20 per cent to cover fixed costs and a margin for profit. If you choose to fly your holidaymakers to the destination, you need not worry about load factors as you will be using a scheduled carrier (which could be one of the low-cost airlines).

Points to be bear in mind when costing include:1. Variations in accommodation and travel prices depending on the

season;2. How your final prices compare with similar packages offered by other

operatorsPresent your planning and costing of the package as a short feasibility study, including all the information you have collected. Include a section that explains ways of maximising the profitability of the planned package holiday.This activity is designed to provide evidence for P5 and M3


unit12ppt

Documents

civil aviation

computerised

rom activity

specialist

independent

car hire companies

tour operating

tour operator